The Effects of Website Provision on the Demand for German Women's Magazines

A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Kaiser, Ulrich Working Paper The effects of website provision on the demand for German women's magazines ZEW Discussion Papers, No. 01-69 Provided in Cooperation with: ZEW - Leibniz Centre for European Economic Research Suggested Citation: Kaiser, Ulrich (2001) : The effects of website provision on the demand for German women's magazines, ZEW Discussion Papers, No. 01-69, Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim This Version is available at: http://hdl.handle.net/10419/24490 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar. Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW. The effects of website provision on the demand for German women’s magazines Ulrich Kaiser¤ Harvard University and Centre for European Economic Research November 20, 2001 Abstract: What happens to demand if a magazine launches a website? This question is empirically analyzed for the German women’s magazine market, a particularly large segment of the German magazine where fierce competition is reigning. Models for differentiated product demand are estimated on panel data covering the period 1990 to 2000, showing that website provision does not significantly affect magazines’ market shares. Magazines that launched a website face a significantly lower price elasticity of demand than competitors that did not go online. Descriptive evidence on the magazines’ website contents shows that websites are used to provide supplementary information and to advertise current print issues. Keywords: differentiated product demand models, magazines, instrumental– variables estimation, panel data JEL classification: C3, L1 ¤Address: Ulrich Kaiser, Harvard University, Dept. of Economics, Littauer, Room 200, Cambridge, MA 02138, USA; phone: ++617 588–1420, fax: ++617 868 5023, email: [email protected] and Centre for European Economic Research, Mannheim, Ger- many. Acknowledgements: I wish to thank Christine Konrad and Laura Berndt of Gruner + Jahr, Carmen Basler of Burda Advertsing Center, Linda Knab of Arbeitsgemeinschaft Markt–Analyse and Birgit Zöllnerof Jahreszeitenverlag for kind data provision and advice. I also gratefully acknowledge the perfect data support provided by Marco Krämer. This research benefited from comments received at a Harvard University workshop presentation, in particular from Richard Caves, Liran Einav, Markus Moebius, Julie Mortimer, Ariel Pakes and Minjae Song. It also gained from kitchen–conversations with Richard B. Freeman on the premises of the National Bureau of Economic Research (NBER). I am indebted to the VolkswagenStiftung for funding this research within the ‘Empirical Economics — Program of Fellowships for German Researchers in the United States’ program and to the NBER, especially Ernst R. Berndt, for hosting me during the academic year 2001/2002. Non–technical summary In recent years, an accelerating number of magazines launched an own website. Launching a website is, however, a costly venture. Even if a magazine is already online, it’s website needs to be maintained and updated. Putting these ‘direct’ costs aside, and additional at least potential drawback might occur: consumers may visit the magazine’s website instead of purchasing a print copy at the kiosk. This paper analyzes the effects of website provision on magazine demand. The fo- cus is on German women’s magazine, a particularly important and hardly fought segment of the German magazine market where ten out of 43 titles are online by 2000. A descriptive analysis of the website contents shows that magazine tend to put up information complementary to the printed issue online and that they use their websites to advertise the current print edition as well as other magazines published by their publishing houses. Moreover, online subscription information occupies a prominent place on the websites. The descriptive analysis shows that there is no reason to believe that consumers may indeed substitute magazines’ website for purchasing the print edition. By contrast, magazines that went online have a significantly younger, better educated and higher income readership than those magazine that are still offline — these characteristics also distinguish internet users from non–internet users. It hence appears as if the decision to launch a website is to a large extent driven by the magazine purchasing clientele. In the econometric investigation, website provision is therefore considered as a magazine quality characteristic. It turns out that website provision does not have a significant effect on magazine demand but that magazine that went online are faced by a significantly lower price elasticity of demand. Interestingly, ‘Brigitte’ is the only magazine that went online where a sizeable negative effect of website provision on the demand for the printed issue is found. ‘Brigitte’ is well known for its dietary information in its spring edition. With regard to the fact that its website allows to call up dietary information for free, it seems as if at least some substitution effects between the online and the print media are at work here. 1 Introduction Launching a website is a costly venture. Even if a website already is online, it has to be technically maintained, its content has to be updated and every now and then a relaunch is in order. At least potentially, additional indirect costs may arise if magazines go online since one might fear that consumers substitute away from the print media towards calling up information from the internet. Given these facts and fears, two questions arise. The first is “why do magazines go online?”, followed by “what happens to demand if a magazine goes online?” This paper aims at answering these questions by looking at the German women’s magazine market between 1990 and 2000 using publicly available panel data. The first German women’s magazine went online in spring 1996. Two competing magazines followed the same year. By 2000, ten women’s magazines out of a total of 45 magazines active on the market provide their own website. This indicates that there are in fact incentives to invest in a website. In this study, the German women’s magazine market and women’s magazine websites are descriptively analyzed. Demand effects of website launching are studied using econonometric panel data techniques within a differentiated product demand framework. An analysis of the characteristics of purchasers of women’s magazine shows that consumers purchasing a magazine that went online are on average younger, better educated and endowed with a higher household income than the consumers of non–online magazines. These demographic characteristics also distinguish internet users from non–internet users, suggesting that the decision to launch a website is likely to be to a large extent driven by the readership of the magazine. An analysis of the ten existing women’s magazine websites shows that the content of the websites is complementary to the information provided by the printed magazine. Article downloads are not provided by the magazine websites. Instead, visitors call up a variety of information coming under headings such as ‘Beauty and fashion’, ‘Love and partnership’ or ‘Today’s horoscope’. Important other ingredients of the websites are the table of contents of the most current printed magazine edition, a subscription possibility and links to products of the affiliated publishing group. Due to the fact that the websites have quite different contents compared to the printed magazine and tend to be used to advertise the current print edition,

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